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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 18

THE RELATIONSHIP BETWEEN CORPORATE SOCIAL

RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

Dr. Subhash Chand1

Kavita Narwal2

Sushma rani3

ABSTRACT

While attention for the social and environmental impact of international business is certainly not new, the past years have seen renewed interest due to pressing global problems. Firms are increasingly called upon to play a positive role, and thus contribute to a more sustainable development. The concrete proposed solution globally lies in the concept of social responsibility of the enterprise in their policy of sustainable development. Therefore corporate social responsibility and sustainability is essentially a way of conducting business responsibly. The philosophy and spirit of corporate social responsibility and sustainability should be embedded in the core values of all enterprises, be imbibed by the employees at all levels and it should infuse into all the activities, processes, operations and transactions of the enterprises.

Today Companies Act - 2013 makes it mandatory for the companies to spend 2% of its net profit in the preceding immediate three financial years on CSR related activities. GRI guidelines (at present G-4 is in effect) emphasises on sustainable development through contribution in economic, environmental and social development. As per ISO 26000, the objective of social responsibility is to contribute to sustainable development, having impact on society and environment. 7 key principles and 7 core subjects are given in ISO 26000 guidelines in this regard. Gandhi's concept of trusteeship focuses on conducting business in a socially responsible way wherein capitalists act as trustee rather than owner of their business. These issues clearly establish a relationship between corporate social responsibility and sustainable development. At present companies are using its sustainability reports as channel for communication to external world regarding its CSR activities and is gaining popularity.

1

Associate Professor, Department of Commerce, Kurukshetra University, Kurukshetra. E-mail: sbains@rediffmail.com. 2

Guest Lecturer, Shyam Lal College, University of Delhi, Delhi. E-mail: kavitanarwaldse@gmail.com. 3

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 19 Keywords: CSR, sustainable development, sustainability, GRI, ISO 26000.

Paper Type: Conceptual

Introduction

World Business council for Sustainable Developments (WBCSD) defines CSR as

"Continuing commitment by business to behave ethically and contribute to economic

development while improving the quality of life of the workplace and their families as well as

local community at large." European Commission (EC) defines CSR as "the responsibility of

enterprises for their impacts on society". To completely meet their social responsibility,

enterprises "should have in place a process to integrate social, environmental, ethical human

rights, and consumers concerns into their business operations and core strategy in close

collaboration with their stakeholders".

The above given definitions of CSR is more relevant in present scenario where sustainability

has become the buzzword. The aim of both of these definitions is to enhance positive impacts

through innovation of products/services that are beneficial to the society and to business

organisation themselves, and to minimise negative impacts on stakeholders.

USA model of CSR is based on philanthropic where organisation makes profit and then

donates a share of profit for charitable purpose. European model of CSR focused on making

investment in communities. In developing countries model of CSR is based on making profit

for the organisation and stakeholders and achieving positive impact on society. Keeping in

mind the above three different aspects of CSR , The United Nation Industrial Development

Organisation (UNIDO) defines CSR as "the way company achieve balance or integration of

economic, environment and social imperatives while addressing shareholders expectations.

This definition seems more effective as it make CSR concept beyond charity, sponsorship

and philanthropy.

The emergence of CSR and sustainable development as important concerns of business

activity is the result of realization that any business concerned with the sole motive of profit

maximization for shareholders, in disregard of societal and environmental concerns is bound

to fail in the long run. CSR policies are closely linked with the practice of sustainable

development. Sustainability practices through CSR involves conduct of business operations

in a way that minimizes harm to environment and local communities, while benefitting

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 20

initiatives, companies can enhance customer satisfaction, and simultaneously boost business

growth and profitability. R&D department in companies help in sustainability efforts through

innovation that are beneficial for the environment and society. Infact, CSR activities are

generally so full with content of, and focused on sustainable development that often CSR

initiatives cannot be easily separated from sustainability policies. Since CSR and

sustainability are so closely entangled, it can be said that CSR and sustainability is a

company’s commitment to its stakeholders to conduct business in an economically, socially

and environmentally sustainable manner that is transparent and ethical.

For leading companies, sustainability or CSR is not only a matter of public relations or

philanthropic activities but also strategic initiatives that is carefully integrated into business

functions. Sustainable development is the development that meets the needs of the present

without compromising the ability of future generations to meet their own needs. It implies

three dimensions -

- Technology

- Resources and social structure, and

- Limits of each

Our government stands up firmly to make sure that the current and original development

actions remain in balanced and optimal harmony with ecosystem and environment. This in

turn will lead to better human security as well. Therefore maintaining environmental and

social security idea is not just the responsibility of government but equally demands a

proactive and effective involvement and participation from the companies and industries.

Hence government of India came up with new guidelines for the corporates in the new

Companies Act - 2013 to have a mandatory CSR activity in their company.

Objective: To study the relationship between Corporate social responsibility and sustainable

development

CSR under Companies Act 2013

The companies Act 2013 define CSR as activities that promote poverty reduction, education,

health, environmental sustainability, gender equality, and vocational skill development.

While this definition of CSR is broad and open to interpretation, it clearly emphasizes

corporate philanthropy rather than strategic CSR. The Act does, however specify that

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 21

India, the only country in the world, is bent to make sure to corporates to take up socially

responsible activities by making it mandatory. With this each of the companies, private or

public limited, either with a net worth of Rs. 500 crores or turnover of Rs. 1000 crores or net

profit of Rs. 5 crores has to spend a stipulated amount of 2% of its total net profit in the

preceding immediate three financial years on CSR related activities. The Companies Act

2013 is likely to bring many SMEs into the CSR fold.

A review of Companies Act 2013, Section 135 and schedule VII clearly indicate a

relationship between CSR and sustainability. Therefore, companies' CSR activities,

mentioned in the Act, will contribute in sustainable development of the country.

Global Reporting Initiatives (GRI)

The GRI has a vision of sustainability. GRI’s vision is that reporting on economic,

environmental and social performance by all organizations becomes as routine comparable as

financial reporting. GRI accomplishes this vision by developing, continually improving and

build up capacity around the use of its sustainability reporting framework. Sustainability

reports help organizations to set goals, measure performance and manage change in order to

make their operations more sustainable. In doing so, sustainability reporting makes abstract

issues tangible and concrete, thereby assisting in understanding and managing the effects of

sustainability developments on the organization’s activities and strategies.

The GRI sustainability reporting guidelines are periodically reviewed to provide the best and

most up-to-date guidelines for effective sustainability reporting. At present G-4 is in effect.

As with all GRI guidelines, G-4 includes references to widely accepted and used issue

specific reporting documents, and is designed as a consolidate framework for reporting

performances against different codes and norms for sustainability. Sustainability information

that is relevant or material to a company’s value prospects should therefore be at the core of

integrated reports. The three categories and their aspects are discussed in the following table:

Table: Categories and aspects in the guidelines

Category Economic Environmental

Aspects Economic performance Materials

Market presence Energy

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

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Biodiversity

Emission

Effluents and waste

Products and services

Compliance Transport Overall Supplier environmental assessment Environmental grievance mechanisms

Category Social

Sub-categories

Labour practices Human rights Society Product

responsibility

Aspects

Employment Investment Local

communities Customer health and safety Labour/management relations Non

discrimination Anti-corruption

Product and service labelling Occupational health and safety Freedom of association and collective bargaining

Public policy Marketing

communications

Training and education Child labour

Anti-competitive

behaviour

Customer

privacy

Diversity and equal

opportunity

Forced or

compulsory

labour

Compliance Compliance

Equal remuneration for

women and men

Security

practices

Supplier

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

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Page 23

impacts on

society

Supplier assessment for

labour practices

Indigenous

rights

Grievance

mechanisms

for impacts on

society

Labour practices

grievance mechanisms Assessment

Supplier human

rights

assessments

Human rights

grievance

mechanisms

ISO 26000: Guidelines on CSR

As per ISO 26000 guidelines, the objective of social responsibility is to contribute to

sustainable development. ISO 26000 defines CSR as the responsibilities of an organisation

for the impacts of its decision and activities on society and environment, through

transparency and ethical behaviour that contribute to sustainable development, including

health and welfare of society. Here definition of CSR correlates with the social and

environmental dimensions of sustainable development. Thus, CSR is a good way of doing

business strategically and profitability.

The seven key Principles, advocated as the roots of socially responsible behaviour, are:

- Accountability

- Transparency

- Ethical behaviour

- Respect for stakeholder interests

- Respect for the rule of law

- Respect for international norms of behaviour

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 24

The ISO 26000 is based on seven core subjects or requirements which indicate relationship

between CSR and sustainable development are:

- Labour practices

- The environment

- Fair operating practices

- Human rights

- Consumer issues

- Organisational governance, and

- Development of the community and society.

CSR and substantial development: Gandhian perspective

"The industry should regard themselves as trustee of the poor". So, CSR can be traced to a

Ghandi's concept of trusteeship, which means that capitalists to act as trustee (not owners) of

their property and conduct of themselves in a socially responsible way.The philosophy of

trusteeship is inherent goodness of human beings. It involves the capitalists and landlords in

the service of society without any element of coercion. It does not want the destruction of

capitalists. Gandhi himself believed that their destruction would result in the end of the

workers. Thus, Gandhi's ideas focused around the concept of dharma-

- duty to the society

- the role of business as being that of a trustee or steward of what you hold, and

- surplus wealth needs to be kept in trust for common good and the welfares of

others.

Thrust area of CSR and sustainability

The CSR involves applying the concept of sustainable development to the corporate world.

With the help of above discussion i.e. ISO 26000, The Companies Act - 2013 and GRI

guidelines, for CSR and sustainability following activities can be thrust upon:

- capacity building

- Empower of communities

- Inclusive socio-economic growth

- Environment protection

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

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Page 25

- Development of backward regions, and upliftment of the marginalised and

under privileged section of society.

Sustainability as communication tool for CSR

The sustainability reports are released by the corporates for the stakeholders showcase the

social activities undertaken by the companies. The companies have CSR activities and

strategies since public, customers and investors expect them to be sustainable and

responsible. The definition for reports on sustainable development has been stated as the

public reports by companies. This usage of sustainability report is one of the recent ways for

CSR communication used by the companies. The sustainability reports released by

companies are a platform for the company to show to all the stakeholders from a top level

regarding the positive responsible corporate citizenship the company follow. CSR activities

can also act as differentiating factor for many companies and they can identify their

uniqueness in this manner. Thus, the sustainability reports are channels for communicating to

the external world used to communicate regarding its CSR activities and are gaining

popularity among various companies. It gives legitimacy to companies' activities and actions,

and aids in covering up and preventing the negative attitudes associated with big corporates

and their actions.

CSR sustainability benefits

CSR and sustainability, if discharged sincerely, is perceived to bring with its several benefits

for the companies. The spin off can be by the way of:

- Improving the brand image.

- Preparing it for risk management through public goodwill in the event of crisis

- Retaining and attractive talent for the organization.

- Winning confidence of investors and shareholders,

- Improving its relations with important stakeholders, and

- Positioning the company for competitive business advantage and financial gains in

the long run.

Measurement of performances

Growing awareness about CSR and sustainability issues have led to attempt at devising some

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 26

transparency and impartial measurement. A number of international private initiatives in this

regard have led to the development of standards and benchmarks for voluntary disclosure,

reporting and audit of CSR and sustainability programmes. Most notables of these initiatives

are:

- Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines.

- Institute of Social and Ethical Accountability: Accountability’s AA 1000

series of standard.

- Social accountability internationals (SAI): SA 8000 Standard.

- The ISO 14000 environmental management standard.

- ISO 26000: Social responsibility.

- Organisation for Economic co-operation and Development (OECD) CSR

policy rule.

- Global compact self-assessment tool.

Challenges to CSR initiatives sustainable

Today CSR activities are very important under the Companies Act 2013 and offering huge

opportunities for the companies to use sustainability report as an indirect tool for

communicating CSR activities. In the current world, with the increase of a more socially

responsible people infused into workforce has driven sustainable development for companies’

activities to a whole new land. Sustainability in every aspect be it supply chains, material

procurement, mergers and acquisitions, marketing, branding of finance and many more

functions is highly valued. Thus, one big challenge which remains is

- the companies have to see that which CSR activities are sustainable, be it

social or environmental.

With this challenge of having a self-sustaining CSR activity agenda the companies are

coming up with initiatives that are sustainable and work on understanding at which point to

drop or alienate from such activities which are detrimental or to the core work of the

company. Thus, corporate that respect and listen to their stakeholders must naturally be

concerned by their growth and profitability, but they must also aware of the economic,

environmental, social and societal impacts of their activities.

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 27

CSR is a concept with a growing impact around the globe. Today CSR goes for beyond the

philanthropy of the past, it is about the business contribution to sustainable development.

Therefore, the promotion of CSR as proactive solutions to societal and environmental

challenge, it can enhance competitiveness in the globalization context. Making CSR

mandatory for the corporate will certainly contribute in this direction. Though responsible

business is necessary but not sufficient condition of sustainable development, therefore type

of CSR that contribute best to sustainable development must be identified and focused by

corporate world.

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A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories. International Research Journal of Commerce and Law (IRJCL)

Website: www.aarf.asia. Email: editoraarf@gmail.com , editor@aarf.asia

Page 28

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References

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